Perspectives Pictet

Strong money-supply growth in February enables us to maintain our forecast for euro area real GDP growth unchanged at 1.8% in 2016. Euro area bank credit flows increased again in February, in line with other indicators such as the ECB’s Bank Lending Survey (see the chart below) and quite remarkably given the challenging financial context in February. We continue to believe that the credit cycle has legs. Moreover, we expect the ECB’s new Targeted Long Term Refinancing Operations (TLTRO...

From a low point of less than $30 per barrel in mid-February, oil prices had risen to over $40 by mid-March. If maintained, this rise will have an obvious impact on growth and inflation on both sides of the Atlantic. The use of a sophisticated macro-econometric model provides an insight into just how large the impact might be. Although oil prices have risen, the huge accumulation of oil stocks as a result of overproduction should serve as a brake on oil prices this year and next....

2016-3-26

We think some of the ECB’s critics are missing the point. In particular, we expect TLTRO II to lower bank funding costs, mitigate the adverse consequences of low (negative) rates on bank margins, strengthen the ECB’s forward guidance and improve the transmission of monetary policy. We expect the take-up at all four TLTRO II operations to exceed EUR500bn, of which roughly EUR400bn should be rolled over from TLTRO I. The resulting reduction in terms of the cost of negative rates could be...

[unable to retrieve full-text content]Playing the rebound in equity markets Alexandre Tavazzi, Chief Equity Strategist, explains the key choices faced by investors seeking to profit from the current market rebound.

Alexandre Tavazzi, Chief Equity Strategist at Pictet Wealth Management, explains what is driving the current market rebound, and the key choices faced by investors seeking to profit from it.

Hard activity data for the euro area have improved since January, but downside risks still dominate despite the ECB’s support. At the very least, monetary policy looks set to remain exceptionally accommodative for an extended period of time. Euro area business surveys (PMIs and IFO) showed renewed signs of life in March after the drops seen in the first two months of the year. Surveys also highlighted the contrasting trend between the manufacturing sector, dented by a subdued external...

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The FOMC sounded quite cautious and surprised at its meeting yesterday as it markedly revised down its Fed funds rate median projection for the end of this year. As widely expected, at yesterday’s FOMC meeting, the Fed chose to ‘stand pat’. Although yesterday's FOMC meeting was perceived as sounding ‘dovish’ and Fed funds rate projections were cut, the Fed still expects to hike at least twice this year. On our side, we continue to look for two rate hikes this year, the first probably in...

At its quarterly policy assessment, the Swiss National Bank (SNB) decided to leave its monetary policy unchanged. The SNB could afford not to cut its reference rate after last week’s ECB stimulus failed to have much impact on the Swiss franc versus the euro. The target range for the 3-month Libor was kept between -1.25% and  -0.25%; the interest rate on sight deposits with the SNB was maintained at a record low of -0.75%; and the SNB reiterated its willingness to intervene on the foreign...